Home Affordability Calculator

How much house you can afford, in one rule

Almost every US mortgage conversation still starts at the same place: the 28/36 rule. Your housing payment — principal, interest, property taxes and homeowners insurance, the four items lenders call PITI — should stay under 28% of gross monthly income. All of your debt payments together, housing plus car loans, student loans, credit card minimums and child support, should stay under 36%. UK lenders phrase it differently, as an income multiple around 4.5 times salary plus an affordability stress test, but the arithmetic lands in a similar place.

The calculator above applies both ceilings and keeps the lower one, then works backwards. It strips out your tax and insurance estimate, plus any HOA or condo fee, to find how much is left for principal and interest, converts that payment into a loan balance, and adds your down payment to get a purchase price.

Worked example: $95,000 income

Take a household earning $95,000 a year with $500 a month of car and student loan payments, $40,000 saved, a 6.5% rate on a 30-year loan, and $450 a month for taxes and insurance.

Gross monthly income is $7,916.67. The front-end test allows 28% of that, or $2,216.67. The back-end test allows 36%, which is $2,850, minus the $500 of existing debt, leaving $2,350. The lower ceiling wins: $2,216.67 for all housing costs. Subtract the $450 escrow estimate and ,766.67 is available for principal and interest.

At 6.5% over 360 months, each dollar of monthly payment supports about 58 of loan balance, so ,766.67 supports roughly $279,500. Add the $40,000 down payment and the maximum purchase price is about $319,500.

The same buyer at 25%

Now hold housing to 25% of gross income instead of 28%. The ceiling drops to ,979.17, principal and interest to ,529.17, the loan to about $241,900 and the price to roughly $281,900. That is $37,000 less house for a payment that is only $237 a month lighter — and that $237 is what pays for a new roof, a furnace, or three months of a job search. Most people who describe themselves as house poor bought at the top of the 28% line.

What debt-to-income actually measures

The front-end ratio is housing divided by gross income. The back-end ratio, usually just called DTI, is every monthly obligation divided by gross income. Underwriting cares about the back end because it predicts default. Notice which payments count: minimum credit card payments, not balances; car loans with more than ten months left; student loans even in deferment, often at 0.5% to 1% of the balance. Utilities, groceries, insurance you pay out of pocket and retirement contributions do not count at all, which is exactly why an approval can look generous while your actual cash flow does not.

Paying off one $400 car loan raises the back-end ceiling by $400 a month, which at 6.5% over 30 years is worth roughly $63,000 of extra purchase price. In most cases that is a bigger lever than saving another year for a larger deposit.

What the down payment really buys

Your deposit adds to the price dollar for dollar, but the second effect is larger. Below 20% down, conventional loans add private mortgage insurance, typically 0.4% to 1.5% of the loan per year — on a $280,000 loan that is $93 to $350 a month taken straight out of the payment budget. FHA loans charge a similar annual premium plus an upfront fee. Enter your expected PMI in the tax and insurance field and watch the maximum price fall; that gap is the real cost of a small deposit.

How rate and term move the number

One percentage point is worth about $27,000 of buying power for this buyer, and moving to a 15-year term costs nearly $77,000 of price while saving well over 00,000 of interest. Neither is right or wrong; they are different trades between price today and cost over time.

Where this estimate stops

It is a budget ceiling, not a pre-approval. Lenders also price your credit score, verify two years of income history, and require cash reserves after closing. HOA and condo fees count inside the housing ratio exactly the way the field above treats them — a $350 monthly HOA fee lowers the maximum price by around $55,000, so use the real figure from the listing rather than leaving the field at zero. Property tax rates vary from under 0.5% of value in Hawaii to over 2% in New Jersey, so the escrow figure deserves a real quote for the area you are shopping in rather than a round guess. Closing costs of 2% to 5% come out of the same savings as the down payment. Run the number, then run it again with the actual tax bill of a specific listing before you make an offer.